GBP/USD corkscrews near key averages as central bank speeches gather

GBP/USD rose early on Monday, but failed to capture 1.2700 and fell back.
A raft of speeches are due from both BoE and Fed speakers this week.
Key US growth and inflation figures are due this week as inflation fears return.

Joshua Gibson FXStreet

GBP/USD churned on Monday, jumping to a fresh 10-week high before slumping back to the day’s opening bids near 1.2630. Cable failed to recapture the 1.270 handle, and price action has fallen back beneath the 200-day Exponential Moving Average (EMA) near 1.2660.

A resurgence in US inflation figures late last week kicked off a fresh round of risk aversion. Investors will be focused squarely on upcoming US Personal Consumption Expenditure (PCE) inflation data due later this week. Traders hope that an early-year uptick in headline inflation data from the US will recede quickly and not solidify into another drawn-out battle with “transitory” inflation that runs too hot for the Federal Reserve (Fed) to deliver rate cuts.

Market participants hoping for an upswing in the pace of Fed rate cuts in 2025 have already been pushed to the ropes as US President Donald Trump tries to spark a global trade war, and a new surge in inflation will be the final nail in the coffin for rate cut hopes. President Trump reiterated his own threats of high tariffs on Canada and Mexico on Monday, warning that tariffs are still due to be enacted “next month” after caving on his own tariff pressures in recent weeks and granting a delay to nearly every country he’s taunted with import taxes on his own citizens.

Not to be left in the dust, the Bank of England (BoE) has its own policymakers slated to make regular appearances this week, though their impact on global markets is likely to remain muted. The BoE has, thus far, largely matched market expectations on the rate cut front. The BoE’s Huw Pill makes an appearance on Tuesday, followed by Swati Dinghra on Wednesday and Dave Ramsden on Friday.

GBP/USD price forecast

With price action backing into the 200-day EMA at 1.2660, middling performance poses a significant risk to any technical trend. GBP/USD has risen around 4.4% from its last major swing low to 1.2100 in mid-January, but bidding appears to have run out of gas.

The next immediate barrier to a fresh leg down will be the 50-day EMA at 1.2520, but bidders will no doubt be waiting in the wings to kick off a new push into the high side from the 1.2500 handle.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold: Gains remain capped by $4,400

Gold regains composure and trades with decent gains on Friday, managing to refocus attention on the $4,440 mark per ounce troy. Therefore, the precious metal reverses Thursday’s decline as the US Dollar alternates gains with losses at the end of the week.

Ripple Price Forecast: XRP extends decline as returning ETF inflows fail to lift outlook

Ripple (XRP) falls below $1.33 on Friday, marking the third consecutive day of declines. The token continues to track the broader cryptocurrency market downturn, with investors closely monitoring heightened macroeconomic uncertainty ahead of the United States (US) Consumer Price Index (CPI) release and next week’s Federal Reserve (Fed) monetary policy decision.

Weekly focus – The hawks set the tone

Risky assets came under pressure this week as energy prices kept creeping higher and the ECB surprised the markets with a hawkish tone. The price of Brent crude touched USD 110 per barrel on Thursday night, highest since mid-May, as news emerged that the Yemeni Houthis had reached control of key port cities and islands near the Bab el-Mandeb strait.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.